Money and Banking: Practice Questions with AnswersCurriculum: Money And BankingGrades: 8–10Questions: 12Mode: Practice These are the real questions from this STEPCAI practice lesson. Read each question, pick your answer, then open Show the answer to check yourself and read why it is right. On STEPCAI the same lesson runs interactively: you click an answer and get instant feedback, and a free account keeps your scores. 1. Which of these is the best definition of money?- Gold and silver coins only
- Only paper bills printed by the government
- Any object that is rare and expensive
- Anything widely accepted as payment for goods and services
Show the answerAnswer: D. Anything widely accepted as payment for goods and services
Money is defined by its function: it is anything a community generally accepts as payment. It does not have to be paper or coins. 2. Before money existed, people traded goods directly for other goods. What is this system called?- Inflation
- Barter
- Investment
- Credit
Show the answerAnswer: B. Barter
Barter is the direct trade of one good or service for another without using money, such as trading eggs for firewood. 3. A major problem with barter is that it requires a 'double coincidence of wants.' What does this mean?- Both traders must live in the same country
- Both traders must use the same currency
- Both traders must each want what the other person has to offer
- Both traders must agree on a government-set price
Show the answerAnswer: C. Both traders must each want what the other person has to offer
In barter, a trade only works if each person happens to want exactly what the other person is offering, which makes trading slow and difficult. 4. Money that acts as a 'medium of exchange' means it is used to:- Store historical records only
- Predict future stock prices
- Buy and sell goods and services
- Measure a person's height and weight
Show the answerAnswer: C. Buy and sell goods and services
As a medium of exchange, money is the tool people hand over to buy things and receive when they sell things, replacing the need for barter. 5. Money serving as a 'store of value' means it:- Loses all its worth once it is deposited in a bank
- Must be spent within 24 hours
- Can be saved now and still be used to buy things later
- Can only be used in the country where it was printed
Show the answerAnswer: C. Can be saved now and still be used to buy things later
A store of value keeps its purchasing power over time, so people can save it today and reasonably expect to use it for future purchases. 6. Money used as a 'unit of account' lets people:- Avoid paying sales taxes on purchases by trading goods directly with each other
- Count only coins, since paper bills cannot measure how much different items are worth
- Trade goods directly without needing any numbers or prices
- Compare the prices and value of different goods using one common scale
Show the answerAnswer: D. Compare the prices and value of different goods using one common scale
As a unit of account, money gives everyone a common measuring stick, like dollars and cents, so the value of very different items can be compared easily. 7. A bank is best described as a business that:- Sets the price of every product in stores
- Prints all of the nation's paper currency
- Only sells insurance policies
- Accepts deposits from savers and makes loans to borrowers
Show the answerAnswer: D. Accepts deposits from savers and makes loans to borrowers
Banks connect savers and borrowers: they hold deposits safely and lend some of that money out to individuals and businesses, usually earning interest. 8. When you put money into a savings account, the bank typically pays you:- A tax refund, money the government returns to you each year
- Interest, a small percentage added to your balance over time
- Nothing extra, since your balance simply stays the same over time
- A service fee, a small charge taken from your account
Show the answerAnswer: B. Interest, a small percentage added to your balance over time
Savings accounts pay interest, which is a percentage of your balance the bank adds to your account for letting them use your deposited money. 9. A checking account is mainly designed for:- Long-term retirement savings only
- Earning the highest possible interest rate
- Frequent deposits and withdrawals to pay for everyday expenses
- Buying stocks directly
Show the answerAnswer: C. Frequent deposits and withdrawals to pay for everyday expenses
Checking accounts are built for easy, frequent access to your money through debit cards, checks, and transfers, making them ideal for daily spending. 10. FDIC insurance on a bank account protects a depositor's money mainly by:- Doubling the interest rate every year
- Reimbursing depositors up to a set limit if the bank fails
- Preventing anyone from ever losing a job
- Guaranteeing the stock market will always rise
Show the answerAnswer: B. Reimbursing depositors up to a set limit if the bank fails
The FDIC is a government agency that insures bank deposits up to a set limit, so depositors get their money back even if the bank itself fails. 11. A credit card is different from a debit card mainly because a credit card:- Never charges any interest under any conditions
- Lets you borrow money from the card company to pay back later
- Automatically saves money for retirement
- Can only be used online
Show the answerAnswer: B. Lets you borrow money from the card company to pay back later
A credit card is a form of borrowing: the company pays the merchant for you, and you must repay that balance, often with interest if not paid in full. 12. A debit card is directly linked to which of these?- A random stranger's bank account
- Your own checking or savings account balance
- The national gold reserve
- Your school transcript
Show the answerAnswer: B. Your own checking or savings account balance
A debit card draws money straight from your own linked bank account, so you can only spend what you already have available. More free high school sample lessonsSee all free sample lessons »
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